St$.$ Paul Co$.$ does business in the United States and New Zealand. In attempting to assess its economic exposure, it com$-$piled the following information.

$$ St$.$ Pauls U$.$S$.$ sales are somewhat affected by the value of the New Zealand dollar $($NZ$$)$ because it faces com$-$petition from New Zealand exporters. It forecasts the U$.$S$.$ sales based on the following three exchange rate scenarios:

$$ Its New Zealand dollar revenues on sales to New Zealand invoiced in New Zealand dollars are expected to be NZ$$600$ million.

$$ Its anticipated cost of materials is estimated at $$200$ million from the purchase of U$.$S$.$ materials and NZ$$100$ million from the purchase of New Zealand materials.

$$ Fixed operating expenses are estimated at $$30$ million.

$$ Variable operating expenses are estimated at $20$ percent of total sales $($after including New Zealand sales, trans$-$lated to a dollar amount$).$

$$ Interest expense is estimated at $$20$ million on exist$-$ing U$.$S$.$ loans, and the company has no existing New Zealand loans.

Forecast net cash flows for St$.$ Paul Co$.$ under each of the three exchange rate scenarios. Explain how St$.$ Pauls net cash flows are affected by possible exchange rate movements. Explain how it can restructure its operations to reduce the sensitivity of its net cash flows to exchange rate movements without reducing its volume of business in New Zealand.EXCHANGE RATE OF NEW ZEALAND DOLLARS$1)$NZ$$0\mathrm{.}48)$NZ$$0\mathrm{.}50)$NZ$$0\mathrm{.}54$

REVENUE FROM U$.$ S $.$ BUSINESS $($ IN MILLIONS$)$$$100)$$$105)$$$110$